Between the melodramatic gamesmanship on Capitol Hill and the eerily empty offices of federal buildings around the country, there is the Affordable Care Act (otherwise known as Obamacare) at the center of a bitter political battle. As the last phases of the law become reality, what many investors may not realize is that capital gains on investments are actually part of the tax structure within the Affordable Care Act and are in effect for 2013. After the Washington sideshow is over, it the surtax provision that will become the particular focus of investing taxpayers and their tax professionals. The law includes a Medicare surtax of 3.8 percent that applies to investment income for those with an adjusted gross income of more than $200,000 for single filers and $250,000 for married joint filers. However, there is an additional component to the tax that makes it even more important to lower the capital gains from your investments. The tax applies to either the normal income or the net income from investments, whichever is lowest.

The second half of the Medicare tax is an additional .9 percent. This number applies to the earned income over those same amounts of $200,000 for single and $250,000 for joint whereas the first tax applied to the lesser of gross income or investment income. So if Mr. Smith files a single return with a $210,000 income and a net investment income of $45,000, the total amount is $255,000. The tax on investment income will be on the lesser of two – either gross income or investment income. The amount Mr. Smith has exceeded the $200,000 threshold by is $10,000. Compared to the investment income of $45,000, the 3.8 percent tax will apply to the lower amount of $10,000 instead and total $380. The second half of the tax at .9 percent applies to the $10,000 that Mr. Smith exceeded over the $200,000 income limit and totals $90. This brings the total surtax provision for the health care law to $470.

Reducing gains on your stock investments not only lowers your capital gains tax but a portion of the Medicare surtax as well. One way to sell a stock to your advantage can be as simple as choosing the right sales methodology. Most people don’t realize it but the default methods used by most brokerage firms are not always the optimal choice for them, particularly when it comes to the tax consequences of the sale.

There are a variety of sales method options available to the investor when a stock is sold. For example, choosing the right tax lots from several different purchases of the same stock can make a tremendous difference in calculating the loss or gain from the investment. Sales method options include FIFO (First In, First Out), LIFO (Last In, First Out) and so forth. The results can be significant using tax optimization strategies. There are some very effective tools online to help you make the best sales methodology decisions. You have 72 hours from the time of sale to declare the preferred sales methodology. Choose carefully. Strategically managing your capital gains just became more important than ever.

Here’s an example of what a difference it can make.

This example illustrates how the sales methodology chosen at the time of sale can make a significant dollar difference on the declared gains or losses. In the example above, for a long-term transaction, HIFO (highest in, first out) offers the greatest advantage, potentially providing a large loss for tax purposes. Compare that to the other options where over $46,000 shows as a gain and you begin to get the picture.

For the short-term transaction, LIFO (last in, first out) and LGUT (loss gain utilization method) provides almost the same advantage by showing a loss to declare. Evaluating your sales method selection prior to selling your stock can make a significant difference in your tax responsibility

So why are the numbers so different depending on which tax lots you choose to sell? It’s all about the cost basis of your securities. Cost basis, in the simplest definition, refers to the original purchase price of the stock plus the expenses incurred on the cost. However, it doesn’t end there. Over time, companies issue dividends or undergo various corporate actions such as mergers, spin-offs and splits, among other things. Those all affect the cost basis value of your securities. In an application like the one used for the example, all of those corporate actions are taken into account in order to calculate the true value of the security. When you choose a particular tax lot, the price and cost basis of the security at that time is what is used to calculate those gains and losses on that group of shares in the tax lot.

Ultimately, it’s all about strategy when you sell your stock. Maximize your gains and minimize your losses. That includes how much you keep after taxes – both capital gains taxes and the new Medicare surtax. However the drama in Washington plays out, the Affordable Care Act and the tax provisions will remain law. Be prepared. With the right planning, you can minimize the impact on your gains.

]]>It’s a Jungle in the World of Online Investinghttp://eshareholder.com/jungle-world-online-investing/
Fri, 27 Sep 2013 17:29:24 +0000http://www.eshareholder.com/?p=261680Although you won’t encounter lions and tigers in the world of online investing you should probably proceed with as much caution as you would if you were walking alone in...]]>

Although you won’t encounter lions and tigers in the world of online investing you should probably proceed with as much caution as you would if you were walking alone in the Serengeti. Without a doubt, the Internet has opened a new world of opportunity to individual investors, but there is also a dangerous side that is filled with hackers, thieves and fraudsters. You are the prey and they are hunting daily for the most vulnerable and naïve. That’s why it is critical to know how to safely move through the jungle and avoid where danger most likely resides, as well as how to take proactive measures to ensure your safety in case you unknowingly trend into dangerous territory.

Following a few simple tips can make all the difference. Let’s start with the basics. Although your online account with major brokerage firms is most likely very secure, there are still ways you can put yourself at risk. The following tips can help to keep you safe:

Have the latest virus and security software on your computer. Some security software like Norton’s charges a minimal fee each year but is certainly worth the added protection as you engage in financial activities online.
Don’t access your account or use your passwords on any other computer than your own (i.e. internet café, library or airport, etc.). Once it is in the computer’s hard drive, it is always in there for some hacker to find. Using unsecured Wi-Fi, where no password is required, in public places allow hackers easy access to your computer. Anyone else sitting in that location can pick up on the signals of your computer, capture your data, and before you know it, they have your passwords, your identity and anything else on your computer.
If your home Wi-Fi is not secured and left open, all the hacker needs to do is sit in a car on your street with his laptop and access your data. Make your Wi-Fi password protected with a complex login.
Always keep your firewall enabled.
When typing in URL addresses, use HTTPS instead of HTTP. The “S” means secured and encrypts your data if you send any personal information to that website.
Make it a point to change your password on a regular basis. You should at least change it every few months. .Avoid making it something that is used on any other type of account or something that someone could easily guess based on information you post on social media. This is becoming a common way for these predators to learn what they need to know about you.
Actually use the “logout” button when leaving the site. Don’t just move on to another site without logging out officially.
Always make sure your online broker sends you confirmations of all transactions so if someone accesses your account, you will receive a notification, which will give you the ability to quickly contact the broker and hopefully circumvent any losses.
Follow the standard rules when it comes to security and never provide your passwords, account information or any personal information to anyone via email or phone. The financial entities you deal with from brokerage firms to banks already know your account and won’t be asking you for it, but those lions and tigers and bears will.
When you are not on your computer, shut it off. Even at home.
Don’t respond to spam offers and other inquiries…at all.
Don’t respond to email solicitations of any kind.
Don’t engage in an investment you discovered on social media or a chat room. Follow the basic rules of researching the stock, from the fundamentals to technical analysis, and then make an educated decision for yourself.

Any type of investment that is being pushed by someone in a chat room and they are asking for money at any point in the conversation should be immediate grounds to terminate the conversation. Exercise tremendous caution.

The SEC specifically warns against online newsletters that are often run by fraudulent individuals.
The SEC also encourages investors to beware of unsolicited offers of any kind. If it sounds too good to be true with unrealistic returns then it is. Period.
Stay away from any investment offer that pushes for money immediately.
The SEC specifically warns against “pump and dump” schemes. These people are on social media and spread rumors about a stock in order to pump it up so they can dump it for a higher price…after you just bought it on their recommendation. You and countless others. Again, find reliable sources and stick with those. Not everything online is gospel.
Beware of bulletin boards and other sources where someone may hype a stock where they have some level of personal interest that is not revealed to you. Hidden agendas do not benefit you as an investor. Stick with reliable sources!
Remember, it is a jungle out there. You are the prey. Your money is the feast..

Of course, we can’t discuss fraud without providing important information of where you can go to confirm the validity of a security or for redress or assistance if you have been defrauded. The SEC (Securities and Exchange Commission), FINRA (Financial Industry Regulatory Authority) and the NASAA (North American Securities Administrators Association) are available to take your questions and concerns to about a particular investment you feel could be fraudulent.

The SEC has a very good section on investor fraud. It covers all the latest Ponzi and pyramid schemes, high yield investment programs, prime bank investments and many others. In short, there are plenty of ways to lose your money in legitimate investments simply by not understanding what you are doing. Why add to that by becoming a victim of fraud because you didn’t follow basic common sense rules? Learn what not to do as much as what you should do.

As an online investor, you should make sure that you take all of the proper precautions, from computer safety to looking at every investment with skepticism until proven otherwise. Understand the investment. Measure and verify performance. Get third party opinions, evaluations and information and by all means, know whom you are dealing with. If you don’t, Google them! Stick with legitimate investment sources. It is up to you to make sure that everything you put your money into is not only legitimate but a good decision!

What does this mean to you? The internet offers tremendous opportunity to the individual investor with access to more information than ever before. With the proper safeguards in place and a healthy dose of skepticism about any unsolicited investment opportunity, you can move through the jungle in complete safety. If you aren’t careful, you can become the carcass on the jungle floor, sucked dry by predators that swiftly move on to the next prey. It’s all up to you.

]]>Private Equity Investment – Not Just For Millionaires Anymorehttp://eshareholder.com/private-equity-investment-just-millionaires-anymore/
Mon, 26 Aug 2013 21:55:48 +0000http://www.eshareholder.com/?p=243715These days, you don’t have to be Warren Buffet to invest in a private company, although that certainly doesn’t hurt. While large, direct investments in private companies are still only...]]>

These days, you don’t have to be Warren Buffet to invest in a private company, although that certainly doesn’t hurt. While large, direct investments in private companies are still only available to the wealthy, there are secondary avenues available to the average investor. For the investor who can tolerate a higher element of risk in return for a potentially substantial gain, the door has opened to the world of private equity investment.

When most of us think of being a shareholder it is in the context of a publicly traded company, but there is another option. Privately held companies can also have their own version of shareholders. How those shares are acquired and determining the company’s liquidity (or lack thereof) are just two of the many differences between public and private shareholding. Understanding exactly what is involved in buying and owning shares in a private company is critical before deciding to participate.

From the Hearst Corporation, Ernst & Young and IKEA to Publix, S.C. Johnson and Mars, private companies have a lot to offer an investor, if you can get in. The easiest way to become a private company shareholder is by investing in a start-up. Of course the risk is higher but someday, your little company that is working out of a garage could become Apple. There are also some more established companies that invite outside investors to participate when they are seeking an infusion of capital for expansion or product research. There are also companies that are having financial difficulties and are seeking investments to turn the company around.

With opportunity comes risk. Private companies are not subject to the same stringent financial reporting obligations that publicly-traded companies are so it can be more difficult to monitor the financial performance of the company. It is also important to keep in mind that the shares are not as liquid as public shares of a company. With a public company, you simply sell your shares on the open market. With a private company, getting out isn’t as easy as getting in. Many financial advisors will caution individual investors on these types of investments and encourage them to participate in a less direct way that involves professional management, such as through an ETF or mutual fund that specializes in venture capital projects.

The stage in the lifecycle of the business can help provide some insight into your level of risk. The start-up stage clearly has the biggest opportunity but also the largest risk. As a start-up investor, you can become a major shareholder but because the business hasn’t entered the market yet, the risk is huge. Once the company has entered the market and survived the start-up stage, investing in these businesses is referred to as the early stage. At this stage, the opportunity is smaller because the risk has been lowered. The company has proven that it has the potential to go for the long haul and capital infusions are generally needed to help them continue to show a positive growth pattern. The mezzanine investing stage is really a combination of debt and equity financing that is typically used to expand the company. It’s really more like a loan that will convert to equity shares if the loan isn’t paid back within the terms of the agreement. This type of investing is only available when the company has operated for a period of time and the investor isn’t taking on a huge amount of risk. Ultimately, when a company becomes super successful like the Mars, Inc., the private equity is mainly limited to the wealthy through brokers at that point.

So how do you acquire shares, or an interest, in a private company? Actually, there are several ways for the average investor to participate in a private company’s potential. Many of these options can be found simply by searching the Internet. I have listed some of the most common way below. Each method varies in the minimum investment amount as well as the degrees of separation between you and the company (i.e. going through a fund, ETF or directly with a venture capital firm).

Mutual Funds – Look for a mutual fund that strictly finances venture capital opportunities. Your risk is less than a direct investment and a fund manager actively monitors and directs the investment. But as with all investments, it is important to study the prospectus and the performance of the fund. How aggressive are they? How much risk do they take? What kinds of companies and industries do they target? What stages of development do they invest in? How does the fund make money? Make sure you understand these details. Finally, the amount to participate will vary greatly so look for a lower rate of share participation.

ETFs – Look for an ETF (exchange-traded fund) that buys shares in multiple venture capital funds, thereby decreasing your risk and increasing the diversification of the investment. These usually have lower buy-ins as well. ETFs are usually considered very good entry points into the venture capital arena.

Venture Capital Firm – Look to invest directly in a venture capital firm that specializes in connecting investors with privately held companies looking for an infusion of capital. The venture capital firm will hold shares in the company. As an investor, you hold shares in the venture capital firm, which reduces your risk, for the most part. Some venture capital firms also provide additional supportive services to improve the company’s performance. Keep in mind that buy-in amounts are usually higher if you go directly with a venture capital firm.

Publically Traded Companies – If you invest in a publicly traded company that acquires shares in a private company through a direct investment, you automatically acquire shares in the private held company, which of course presents little to no risk to you. In fact, if you already hold stock in a publicly traded company, you may also own stock in a privately held company and you don’t even know it! That information is available through public company’s website and annual report.

Employee Stock Purchase – Some privately held companies actually offer employee stock ownership plans to their employees. That is a great way to buy in to a privately held company. As an employee, you have a great vantage point of how well the company is doing. Privately held stock purchase plans have only one catch, they have a buyback clause that is guaranteed. In other words, you can only sell the shares back to the company, not to anyone else, which eliminates any bidding war that you could potentially create by selling the shares to interested buyers.

Investing in a private company, particularly one very early in its lifecycle should be a long-term proposition. Mars, for example, did not become the candy giant that it is today overnight or even in a couple of years. It took a long time. However, with that said, the success achieved over decades certainly would have made this an excellent investment when it was a start-up. It is now in the top ten private companies in the U.S., with over $30 billion in sales.

In today’s corporate environment, many times these promising start-ups and early stage businesses catch the eye of larger companies. When these larger public companies opt to purchase these starter enterprises, it is often a boon to the owners and private shareholders of the company, but you can’t make a decision based on the possibility. If the starter company has a great product, it is an attractive investment to you and to any potential buyers.

No matter how you wind up with an investment in a private company, especially a very young one, all the same investing rules still apply. Diversify your overall portfolio. Track and monitor the value of your investment. Know when it’s time to cut your losses or reap your gains. Understand the risk/reward ratio. Most of all, realize that not every opportunity will be the next Mars candy company. Many ventures fail, miserably. But in order to get in with the next privately-held Mars success, these are your options on how you do it – unless, of course, you happen to be Warren Buffet!

What does it mean to you? For those investors who want to take on a bit more risk as a trade-off for a potentially larger reward, venture capital companies, funds and ETFs offer avenues to do so. Getting in on the ground floor of a company that eventually becomes a billion dollar company is the dream of every investor. Most start-ups began as private ventures so that’s the critical time to become an investor in their efforts. The hope is, of course, that you are rewarded for that additional risk. If you have the ability to put some money on the line in this riskier area of investing, and you have the stomach for it, who knows? You could one day hold shares in the next Mars candy company and even if you aren’t a millionaire, you may certainly feel like one.

]]>Do-It-Yourself or Use a Pro?http://eshareholder.com/do-it-yourself-or-use-a-pro/
Tue, 13 Aug 2013 22:05:22 +0000http://www.eshareholder.com/?p=237002Over the years, the concept of “Do It Yourself” (DIY) has come a long way. As access to information grows, more and more people are taking DIY into consideration for...]]>

Over the years, the concept of “Do It Yourself” (DIY) has come a long way. As access to information grows, more and more people are taking DIY into consideration for everything from home improvement projects to doing taxes – almost anything that could potentially be done on your own with the proper tools and knowledge. Now, with the power of the internet, the decision to DIY can also apply to a task as complex as building a portfolio with your hard-earned money. Should you do it yourself or turn to a financial professional? Only you can answer that question, but here’s some food for thought.

Using a Pro

This is a decision that cannot be made lightly. If you prefer the assistance of a professional, then it’s important to choose that professional very carefully. After all, it’s your money. Act like it. Check out the track record and performance of the professional you choose. Educate yourself about investing even if you are entrusting someone else to do it for you. Just because you are using the services of a professional, you should never feel that you don’t need to take the time to learn. Otherwise, how will you understand what the professional is recommending? Ultimately, you are responsible for what that professional does or doesn’t do with your money. If you don’t understand the markets then how can you truly participate in the decisions or intelligently question your advisor’s recommendations?

Finding a professional that you are comfortable with goes a long way in establishing a confidence level between you and your advisor. As you begin your search, you’ll find there are all kinds of financial professionals with over 20 designations and certifications that identify various levels of specialty and knowledge. Each designation has set requirements on criteria such as years of experience, educational background and level of knowledge, etc. Your search criteria should include level of experience, areas of specialization, registrations and certifications, customer service skills, the professional licenses and designations, and how they are paid. Yes, how they earn their money is actually a critical aspect.

Financial professionals charge in a variety of ways. Advisor fees can be based on an hourly rate, commission, or even a simple flat fee. Then there are those who charge using a combination of these methods. Why is this so important? How they are paid can affect the recommendations they make to you since they may stand to make more money with one investment choice over another. It’s important that you keep that in mind as your advisor makes investment recommendations to you. Always scrutinize every investment recommendation just as zealously as you would question a contractor working on your house or a mechanic on your car. Remember, you aren’t the only one who wants to maximize income!

There are a lot of good, very competent financial professionals out there and for those who prefer to use their services, it’s important to do the due diligence in selecting one. Unfortunately, like with everything else in life, not all advisors are created equal, so it is your responsibility to make sure that your employ a good one. One way to verify if your advisor is in good standing and properly registered is to check with the SEC (Securities Exchange Commission), FINRA (Financial Industry Regulatory Authority), and/or appropriate regulatory agencies in your state. You’ll find a range of information including whether or not the advisor has had any disciplinary action or complaints filed with these organizations.

Once you have chosen the professional you want to use, it doesn’t mean you can sit back because someone else is managing your portfolio. If you had a contractor in your home installing tile throughout your house, wouldn’t you check on the quality of their work and the progress they were making? Whether it is tile in your home or assets in your retirement portfolio take charge and look out for your money just the same.

Do It Yourself

The flip side of the coin is choosing to take complete control of your investments and doing it yourself. Although it is an empowering decision, you must have the time to learn and to research various investments in detail. The good news is that no one will make your investments a greater priority than you will. But investing successfully yourself can’t happen overnight. It takes time, commitment and confidence.

It is important to start with some basics. Set your time horizon, risk tolerance and your investment goals. Are you 25 years from retirement or 5? That will require completely different strategies and levels of acceptable risk. These are all exercises that you would have to go through with a professional as well. Lay the groundwork first and then develop your investment strategy.

The risks of investing on your own are obvious and if you don’t take it seriously, you will certainly increase your chances of losing your money. Sure, you can lose money with a professional as well, but when you do it yourself, the only one you can blame is yourself. Clearly there is a learning curve, but thanks to the abundance of information on the internet as well access to tools such as virtual stock simulators, you can practice before opening a real account. That way, the majority of the learning curve can take place long before you ever invest a dime.

When it comes to the time required to properly manage your portfolio, you dedicate a regular block of time to analyze and monitor your portfolio in detail. Does it need rebalancing in order to remain diversified? How is each stock doing? What is the latest news on each company and industry you are invested in? What economic news could affect your portfolio? What’s your plan of action if a stock runs into trouble? Does that mean sitting in front of the computer every single night? – Of course not. However, in a volatile market or unstable economic conditions, more frequently is better than less. Be pro-active, not reactive. Monitor what is happening in the market and with your stocks and have a plan.

To succeed in investing for yourself, you need to understand how to effectively assess the risk of a particular investment. To do so, you must learn the basic concepts of the market, how to objectively analyze a stock or a fund and how to measure and track the performance of your portfolio. This takes time and effort. If you can commit to both, then you have the potential to do well.

Another important element, particularly when you are investing is to avoid emotional decisions. While that may be easier said than done, it is crucial to succeeding. On many occasions, you will be faced with having to make business-like decisions that are critical to minimize losses and/or reaping gains. Stay objective and focused on your goals. These difficult decisions actually become easier as times goes on and as your confidence begins to grow.

Many of the most successful investors are doing it themselves. There are also investors who give a portion of their portfolio to a professional and also manage some investments themselves. It has been proven that professionals do not always do better than the market averages. In fact, if you examine many mutual funds, you’ll find that most of them underperform those averages. These are funds managed by professionals. So don’t ever assume that because they have a designation or certification next to their name that they will do a better job than you can for yourself.

On your own or with a pro, it is critical that you learn all you can about the investing world. That knowledge is power and that power can translate to a strong portfolio if you are prepared to fully participate. With or without a professional, you must play an informed and responsible role in the investment of your money. Whether it is laying tile on the foundation of your home or building a portfolio as the foundation for your retirement, you are in control of your success.

What does it mean to you? Everyone is different. Some investors feel empowered by doing it on their own and often do quite well.

]]>
They Have a Club for That?http://eshareholder.com/they-have-a-club-for-that/
Thu, 01 Aug 2013 19:41:43 +0000http://www.eshareholder.com/?p=229754

These days you can find an organized club for every possible area of interest – square dancing, archery, golf, model railways, cars, astronomy, photography, bingo, collectibles, film and even travel...]]>

These days you can find an organized club for every possible area of interest – square dancing, archery, golf, model railways, cars, astronomy, photography, bingo, collectibles, film and even travel – all of them fun and interesting recreational activities. But investing? Investing is a far more serious subject than learning to square dance. But yes, there are investment clubs. Several studies show them growing substantially in recent years. It seems that along with learning how to swing your partner, people are turning to clubs in increasing numbers to learn how to invest their money.

So, what exactly is an investment club? It’s a group of people who pool their money and invest together with the portfolio belonging to all the participants. Naturally, their aim is to make a profit, but more importantly, they want to learn how to be successful investors and feel more comfortable having the support of a group. The clubs that emphasize investing education seem to be the most successful and many participants will tell you that it is what they learn is extremely valuable. One story in the Wall Street Journal stated that over 60% of investment clubs produce annual returns over the lifetime of the club that beat the market. That’s nothing to scoff at.
Most clubs require small amounts to participate, usually from $20-$50 a month. Of course, the more members in the organization, the greater the purchasing power of the portfolio. Every member of the group, averaging a maximum of 15 people, brings different level of knowledge, experience and capability into the effort. Coupled with assistance from various organizations that support investment clubs, the group learns the ins and outs of investing and builds a joint portfolio over time.

You might wonder how this works from a legal perspective. The club is formed as a legal partnership, not only to address tax issues but to also protect the financial interests of all involved, especially if anyone wishes to leave the organization at any point, or new people want to join. There are officers, regular meetings and everyone must participate in researching stocks and companies. One member is appointed as the broker to actually make the transactions online once decisions are made. Some organizations provide the clubs with guidelines for operations, bookkeeping, taxes and more. You are literally in business together so the people involved should be those you know and trust. After all, this isn’t your normal club. This involves money, your money and everyone in the club is your partner.

Various agencies, including state departments of revenue and/or taxation, regulate various aspects of investment clubs. This makes it very important for the club to follow the regulations dictated by both agencies. It’s just not as simple as everyone pooling their money into a jar to bet on the winner of the Super Bowl. Therefore, it’s important to get the paperwork right and be thorough.

Make no mistake. This is also a commitment of time, money. Each participant needs to make a long-term commitment to this effort. Many investment clubs are quite successful when the members are committed and processes are followed.

As with everything, there are two sides of the coin. It’s not all about learning and making money. There are pitfalls as well. Not all clubs are successful. Not all clubs stay together. Not all clubs run smoothly. One of the most important elements to success is to choose partners, or members, for the club that have a similar investment approach with like-minded goals. If you can’t agree on that right from the start, the entire venture is doomed. Some may want to play the market while others are strictly buy-and-hold investors. That’s not a good match for a successful club.

If all the members do not participate equally (financially and the time to attend meetings and research stocks), then how can they expect to share equally in the proceeds? One of the biggest pitfalls that will destroy a club is not making sure that the financial breakdown per share (per participant) is spelled out fairly and clearly. That includes procedures for withdrawals, either partial or complete, by a member. The most successful ones use a unit-value system that divides the worth of the assets in the club by total units. The units each member owns are weighted by contribution levels so whenever a member might leave, they have a certain number of units in the portfolio. Depending on the value of the portfolio at that time, it is divided by the total units and the departing member is given the dollar value of their number of units (or shares).

The main investment principles that most clubs adhere to are to 1) diversify; 2) think long-term; 3) reinvest earnings such as dividends, continue to invest no matter what is happening in the market (i.e., dollar cost averaging) and 4) to invest in companies and funds that center on growth. These are sound investment principles that the most successful clubs follow. There are some, however, that focus on higher risk trading and faster growth, which is fine as long as that is what everyone has signed on for.

The type of club we have discussed is otherwise known as a group portfolio club where the group actively participates, contributes and makes decisions for the portfolio as a whole. It’s also a great way for a beginner who doesn’t have much money to start investing. The group dynamics of the club can be fun and provide investment discipline. The risk is lower because decisions are balanced between several people and groups tend to be more conservative in nature when it comes to investing than an individual. But there is another way to go in an investment club that is far less involved yet does provide learning opportunities.

Self-directed clubs are more of a coffee klatch approach where members share information on investment ideas and strategies, but ultimately, everyone applies that to their own investment accounts. This may suit some personalities and investing styles better but for many, especially beginners, a more structured approach with the group portfolio is preferred.

In many ways, this is like any other club, i.e. learning new things, meetings, a commitment to a group of people with a common interest, and even having fun. But as we said before, this is also about money. Your money. That requires a higher level of commitment than learning how to promenade or sashay with your partner. On the other hand, square dancing is the epitome of teamwork, all eight members of the square working together on each move as it is called out. So, if you are thinking of joining or starting an investment club, maybe the idea of the grand square, where everyone is an equal participant in the group’s success isn’t so far apart from that of the square dance club. If this is the investment choice for you, then choose your partners and do-si-do your way to investing success.

What does it mean to you? Investment clubs can be fun, provide you with an affordable route to invest smaller amounts of money and encourage investing discipline. They can also be problematic, particularly when the group begins to disagree and/or dissolve. Who you choose to invest with is critical. How you plan to approach investing in terms of strategy is just as important. If you start or enter a group portfolio investment club, exercise the proper caution but recognize there is a real opportunity to learn and make money. If you prefer the self-directed clubs, the only real risk is taking the advice of someone who may not really know what they are talking about. But that’s where your responsibility as an investor comes in. Research and confirm everything on your own before making any investment decisions.

]]>Finding Needles in a Haystackhttp://eshareholder.com/finding-needles-in-a-haystack/
Wed, 24 Jul 2013 06:18:51 +0000http://www.eshareholder.com/?p=222868Imagine a haystack that is at least 20 feet high and twice as wide in circumference and there are 9,000 needles hidden in there. 25 of them could be more...]]>

Imagine a haystack that is at least 20 feet high and twice as wide in circumference and there are 9,000 needles hidden in there. 25 of them could be more valuable than the others than the others but at first glance they all pretty much look the same. Trying to search through the haystack for those special needles is definitively a formidable task that could take quite a long time. But what if there was a way to sort through all the hay and needles in minutes to find those particular 25? Now that would be worth looking into.

So it is with stocks. The U.S. Stock Exchanges have over 9,000 stocks between them, so how do you find the ones that may help you to buy that summer home on the beach? Sure, you can go with the most well known stocks; the ones that all the institutional brokerages buy; that’s easy. In fact, some of them should probably be in your diversified portfolio. Although sticking with the big, well-known names may be safer, that leaves thousands of other companies you haven’t heard of; some of which may be the next Apple (AAPL) or Microsoft (MSFT). In other words, golden opportunities are lost in that giant haystack that is almost impossible to sort through…unless you use a stock screener.

A stock screener is a powerful tool that can help you sort through the “hay” in order to find the potentially valuable “needles.” While stock screeners are not foolproof and provide no guarantee that the companies are hot commodities, they are an excellent way to examine specific numeric data that can help you identify potential opportunities. They will find in seconds what could take you hours, days or weeks to do.

The search criteria can screen for data such as market capitalization, industry type, revenue, EPS, ROE, P/E ratio, share price, volume and more. From there, you will be provided with a list of companies to further analyze from a variety of perspectives, such as company news, industry, analyst opinions and charts, before you invest your money.

If you enter “stock screeners” into a search engine, you find everything from the very basic for free to the very advanced that requires a fee. Although the fee-based screeners offer more in depth data that will help you to better identify the type of investment that works for your portfolio, it’s best to try out the free ones first for a test run.

What should you look for in a stock screener?

The data should be up to date. If it isn’t based on recent information, it simply isn’t worth using. Believe it or not, that is an issue for some of them.

It should have the ability to sort and save your search results. Sounds simple enough but not all of them do.

The better screeners incorporate certain technical analysis criteria. These are definitely the more sophisticated screeners and are worth finding, especially if you use technical analysis for your investment decisions.

Historical comparison is definitely a feature that can be very helpful in your stock analysis. Being able to historically compare your results by criteria such as benchmarks by sector or industry is very important.

Yahoo Finance has one of the best free screeners. They also have bond and fund screeners as well as other invaluable tools for uncovering potential investments that warrant consideration. CNBC has a good stock screener for beginners. Others include FinViz, Morningstar, MarketWatch, Google Finance, Wall Street Journal and Zack’s. They each have their pros and cons, but they provide a good variety of free screener options to choose from.

If you get to the point where you find the free screeners helpful but want something far more advanced, then it’s time to check out the fee-based screeners. In addition to detailed company information, the more advanced stock screeners will also provide you more features and functionalities such as a ranking system for your stock results based on the criteria you plugged in. Many even have the ability to import the results on to an Excel spreadsheet to save for your easy reference. You’ll find some good ones on Morningstar, Portfolio123, Stock Investor Pro and Stock Screen 123 (this one is considered the gold standard in many ways).

Another attractive feature on the fee-based stock screeners is the “back testing” feature. If that is a new term for you, as an investor, then it’s time to embrace the concept. Back testing is a way to review the historical data of a stock and then reconstruct your investments by using that historical information as an investment strategy. In other words, let’s say you like to buy a stock after it appears to bottom out and begins a major reversal into an uptrend, then sell at the stop, wait for it to go back down and do the same again. In other words, you essentially engage in market timing. Does that strategy work better than buy and hold on a particularly volatile stock, for instance? This feature will help you to find out.

With back testing, you plug in your buy and sell criteria for a set block of time that you specify. The application runs the numbers for you by whichever strategies you test. It’s quite interesting to see the difference in dollar amounts from an historical perspective. What’s even more important is that it allows you to refine your strategy going forward. You can play out the various investing scenarios to see the results you would have achieved. Does your strategy beat the market or underperform? The results can surprise you. Hopefully, you become a more successful investor as a result.

The really good screeners also give you statistical analysis of your strategies including profit/loss, volatility, ratios, returns and more. But it should also be said that back testing has its flaws so it’s important to understand that past performance is no guarantee of future results. The value of your results also depend on whether you have chosen a long enough period of time and whether you are comparing stocks only in one sector or to a broader selection across several sectors. Still, historical data and analysis does allow you to refine your strategies to one degree or another, which is the whole point of back testing. To try a simple back testing application, visit www.Zacks.com, www.MarketInOut.com or www.Stockbacktest.com.

So, thanks to technology, it may not be as difficult as you may think to find those 25 needles in that haystack. It still took some work and careful searching, but companies you never would have looked for, heard of or found on your own could suddenly become a part of your portfolio…and are doing well.

What does this mean to you? Smart investing takes time. Unless you are an investor with lots of time on your hands, any available tool to help you find and research new investment opportunities puts you a step closer to your investment goals. Using a screener to weed out the underperforming companies and zero in on the top producers in various industries or even those who have the potential to reach the top, is certainly a way to optimize the time you spend making investment choices. It’s an easy way to present you with new investing options and then let you back test your strategies to become a smarter and more successful investor overall.

]]>Chilled or Frozen? Good For Hot Summer Days But Not Your Stock!http://eshareholder.com/chilled-or-frozen-good-for-hot-summer-days-but-not-your-stock/
Wed, 19 Jun 2013 10:35:34 +0000http://www.eshareholder.com/?p=202847In the heat of a long, scorching summer, thoughts naturally turn to all things chilled and frozen. From chilled watermelon to ice cream and water ice, it is an absolute...]]>

In the heat of a long, scorching summer, thoughts naturally turn to all things chilled and frozen. From chilled watermelon to ice cream and water ice, it is an absolute delight. However, when “chilled” or “frozen” applies to a stock you hold, your summer can suddenly get a whole lot hotter.

Too many investors don’t understand the basics of “chills” and “freezes” of securities. According to the SEC, a “chill” is a “limitation of certain services available for a security on deposit at the Depository Trust Company (DTC)…a “freeze” (or global lock) is a complete restriction on all DTC services for a particular security on deposit at DTC”. So just who is the DTC and what exactly does this mean?
The DTC, or Depository Trust Company, is basically a clearinghouse created by the securities industry to expedite the sale and settlement of stock trades. They handle custody of the security and book-entry transfer services for each transaction. Every year, the DTC processes and settles transactions worth over $300 trillion for securities issued in the US and 121 countries. At any given time, the DTC holds 3.6 million securities with an approximate worth of over $35 trillion. Participants of the DTC include most brokers, dealers and banks, all of whom have their securities at the DTC. The DTC is also a member of the US Federal Reserve.

The DTC was combined with the NSCC (National Securities Clearing Corporation) to form the DTCC (Depository Trust and Clearing Corporation), which is now the world’s largest post-trade financial services company. Everything has been automated and streamlined to make the markets more efficient and secure. While the DTC is a subsidiary of the DTCC, other branches of the DTCC handle mutual funds, bonds, trusts, money markets and other financial assets well over a quadrillion dollars a year. These are astounding numbers which only serve to illustrate the power of this entity.

The DTC enacts chills or freezes on a security for a range of issues. Non-compliance with DTC rules along with legal, operational or regulatory concerns are prime examples. Some situations are resolved in very short order while others are far more serious. But while the stock is chilled or frozen, it can not only drastically affect the value of the security but how the company operates financially. If the situation or issue cannot be resolved, the security is removed from the DTC altogether, which is obviously devastating to a company.

A chill limits what services the DTC will provide. It may prevent the company from being able to add or withdraw a security from the DTC. Once the area of concern is addressed and corrected, the chill is lifted and the security may resume normal trading. However, the aftereffects of this action can be “chilling” on the company stock for quite some time depending on the nature of the infraction. You may never even find out just what the issue was since the DTC is not obligated to disclose anything if they so choose. That might change in the near future. In March of 2012, the SEC offered an opinion that some form of legal due process needs to be in place with some level of SEC involvement as well, though little has been done to move that forward yet. The goal is to provide a fair and balanced approach where a company has redress and appeal capabilities that aren’t in place at this time.

When the security is actually frozen, obviously that is worse and for reasons that warrant a more severe approach. A freeze means all services at DTC are halted completely. When the stock is frozen, the DTC notifies all parties automatically so that future trading is blocked until a determination is made and the freeze is lifted. This “participant notice” is also available publicly on DTC’s website at www.dtcc.com/legal/imp_notices. There is a lot of information there with plenty of industry terminology that might dissuade you from trying to find out about a company you are checking on, but use the search engine on the site and persist.

Next time you catch a headline about a stock you are interested in, or even own, and see either “chilled” or “frozen” next to the name, you won’t have that glazed look on your face like you have been out in the summer sun too long. You’ll know the heat has just been turned up on that stock and you could very well get burned.

What does this mean to you? As an investor, you should ask your broker about any DTC restriction history on a stock prior to buying it. If there is a history, perhaps you want to reconsider. If you are trading and investing on your own, check out www.dtcc.com and do your homework. The infraction(s) could have been minor glitches that were easily resolved, or there could have been a major issue with the company that warrants a closer look before investing in the company. Knowledge is power! no credit check small loans

]]>Is the IPO Rollercoaster Worth the Ride?http://eshareholder.com/is-the-ipo-rollercoaster-worth-the-ride/
Wed, 08 May 2013 16:52:02 +0000http://www.eshareholder.com/?p=167971On a rollercoaster, there’s nothing like the thrill of anticipation as you roll up the tracks, ever upward, higher and higher. Once you’ve reached the top, take a deep breath...]]>

On a rollercoaster, there’s nothing like the thrill of anticipation as you roll up the tracks, ever upward, higher and higher. Once you’ve reached the top, take a deep breath to prepare for what is to follow. Then, in the blink of an eye, you are suddenly racing to the bottom, the wind in your hair, the screams piercing your ears, the fear and excitement are undeniable. It’s just a ride, you tell yourself…and before you know it, you are pulling to a stop and with a smile of relief on your face, you realize just how much fun it really was.

Not so with an IPO.

While many aspects of an IPO are often like a rollercoaster, the difference is your money is at stake which makes racing to the bottom far less enjoyable. So why get on the ride in the first place? How do IPOs work? Why are IPOs like a rollercoaster ride? All of these are good questions and you really should know the answers before you invest in them.

An IPO, or initial public offering, is when a private company goes “public”, which means that shares of stock in the company are available for purchase to the investing public in order to raise capital, increase public exposure, as well as a host of other reasons. It’s the premiere of a company on the investment world stage via one of the stock exchanges on Wall Street. Making the decision to take this step is a very complicated and expensive process which ultimately gives the overwhelming advantage, and risk, to the investment bank and underwriters involved. The system, by design, basically leaves the retail investor out of the loop…until the stock hits the open market. But what goes on before that very moment that you can buy in?

After a mountain of paperwork to meet SEC requirements, the company finds an investment bank that will not only underwrite the offering, but ultimately be authorized to sell the stock when the time comes. The offering is made available to institutional investors and large retail clients of the underwriters first. This is done with a red herring prospectus that spells out many of the basics of the offering. It’s preliminary in nature and the shares are not for sale at that time, but brokers can take “indications of interest” from their preferred clients which are later converted into stock orders at the launch.

Among their other responsibilities, the underwriters also determine the stock sale price, making sure that the stock price is not underpriced or overpriced by too much. The opening price per share can either make or break the success of the IPO.

Once all the behind the scenes work is completed and the IPO is in compliance with all SEC requirements, the date is set and anticipation begins to build. Even though IPOs occur with some regularity without any fanfare, there are always a few that are highly publicized and coveted, such as the recent Facebook, Ebay and Google IPOs that provided ticket holders with the wildest ride of all.

Now, the debut of some IPOs can start soaring and then continue to soar even higher. If you happen to invest in a company stock like that, your ride can certainly be the thrill of a lifetime, but for most retail investors, investing in IPOs can be a very bumpy and scary ride. So, when you hit the “buy” button on your trading account seconds after the stock hits the open market, you have just gotten on that rollercoaster. Be ready to ride.

The debut of the IPO stock for Facebook quickly climbed from the initial price of $38 to $45. If you had purchased this from the onset, it was a thrilling climb until the institutional buyers began to quickly sell for maximum profits. Then the stock dropped as low as $25, just like a rollercoaster ride. This particular part of the ride is called Flipping, which is the sale of a hot IPO in a very short time for a quick profit. It’s pretty predictable in a situation like this except to inexperienced retail investors who don’t understand how an IPO works. Almost two months later, Facebook stock was still hovering around $31 or so, well below the initial offering price. However, if you bought it when it hit bottom at $25 after the flipping occurred, you still made a profit.

The price could also drop in a short span of time due to a lock-up period which is a period of time when key players (company officials and employees) are legally bound to hold on to their shares and are not permitted to sell them. That period of time ranges from 3-24 months, with 90 days being the legal minimum as per the SEC. At the end of that time period, and it differs by company, there is often a flood of shares being sold by those key players. This produces a downward effect on the price of the stock.

Another relatively unknown aspect of an IPO debut is the Quiet Period. For 40 days after the IPO’s public debut, all those involved from underwriters to insiders, are restricted from distributing any statements, earnings forecasts or reports for the company. Only after this period does information become available to the public. Hopefully by that point the stock price will have stabilized but watch for movement in the stock as a result of any news, statements or other information that may be released after that 40 day period. As an informed retail investor, you can be ready to respond accordingly.

When you are purchasing any type of security, it is important to research that company. Analyzing stocks, even with a good company history, can sometimes be difficult. An IPO is even more challenging. The historical data and performance that you can research for stocks isn’t available, which puts you at a slight disadvantage as an investor. It’s important to remember that the opportunity to invest will be there after the hype, after the rollercoaster ride, so once there is historical data to review and you can analyze it objectively as an investment, you can make a sound decision.

With that being said, if you are open to the risk of the exciting rollercoaster ride and have some discretionary funds to buy a ticket, there is money to be made if you understand the risk and nuances of IPOs. For those who are a little more cautious, there are mutual funds that solely focus on IPO’s. Let the mutual fund managers use their expertise to get you in and get you out. If you are the kind of retail investor who wants to do it yourself, then exercise caution, don’t get greedy and recognize when the tide is turning. Be ready for large investors flipping, for the lock-up period to end and the quiet period to give way to news and information that will also influence the price. Put in your limit orders and when you have made a nice profit, take it.

While Facebook’s IPO may have been lackluster at best, consider that of LinkedIn. The initial public offering price was $45. It shot up to $90 and then still further to $122 in that same trading session, finally settling at about $94. In that one session, it was up 109%. As of mid-July 2012, a little over a year later, it was around $103. But in November of 2011 thru around January 2012, the stock took quite a dip to about $60 before climbing back up. So this volatile stock had a rollercoaster ride of its own that stretched out over a longer period of time. But selling at the high and rebuying on the dip would have provided another opportunity to profit.

Those two peaks have a nice spread from the low to the high. Now that’s a ride that turned out well for the retail investors who did it right and understood the rules.

What does it mean for you? Investing has a very real risk versus reward component to it. With IPOs, in particular, both the risk and reward possibilities are higher than the average stock transaction. It’s not for every investor. However, for those willing to board the rollercoaster of an IPO, the ride will certainly be exciting. Whether you finish the ride with a profit or a loss is a risk only you can decide to take.

]]>Twit, Twitter and Tweet Your Way to Investing Successhttp://eshareholder.com/twit-twitter-and-tweet-your-way-to-investing-success/
Tue, 19 Feb 2013 21:24:27 +0000http://www.eshareholder.com/?p=95613If the term “stock twit” sounds more like a personal insult instead of a great resource, then it’s time to enter the 21st century. Social media may have started as...]]>

If the term “stock twit” sounds more like a personal insult instead of a great resource, then it’s time to enter the 21st century. Social media may have started as a way of sharing daily activities with friends and family, but it’s come a long way in a very short time. It is now the tool of revolutionary political action as well as that of the savvy investor. If information is power, the investor using social media just became the Incredible Hulk!

Financial and investing websites are great resources for information however social media outlets allow investors to actually talk to each other, giving a whole new meaning to the term “networking”. It is literally changing the way business is done across the board. The barriers between companies, their customers and investors have been swept away and relationships are being redefined.

Investors are using social media in a variety of ways, not the least of which is to seek advice and opinions from other investors. They discuss stocks and other investment vehicles, financial advisors and brokers, compare mutual funds and fees, and develop overall investment strategies.

Aside from simply sharing information, shareholders/investors are using social media to exercise their newly awarded right to weigh in on how their company is doing business as well as the executives that run it. They garner support or opposition to proxy proposals, overthrow boards, oust embattled CEO’s, and literally change business practices and policies, all through investor pressure using social media. A perfect example of this was a blog started by one single investor unhappy with the performance of the CEO of Yahoo. By gradually assembling enough investors who represented 2.6 million shares worth about $60 million, the CEO was forced to step down. Social media provided the mechanism, or gathering place, for this kind of shareholder/investor activism to take root.

A popular social network forum unabashedly designed to affect change is www.moxyvote.com. According to their website, “Moxy Vote’s platform enables you to find your voice, band with others and influence companies to alter their policies in support of the causes that are important to you.” They proudly proclaim they are out to “change corporate behavior”. Among other things, they have a myriad of letters to various corporations urging actions on everything from recycling and phasing out fur products to encouraging employee diversity and more eco-friendly practices.

There are a variety of social media outlets, some more popular than others, that provide this kind of platform to investors. Whether it is YouTube, Twitter, Facebook, Seeking Alpha or countless others, they each have something to offer the investor. For those investors in the HNW (High Net Wealth) category, there are exclusive sites requiring registration and “approval” to participate. Minimum requirements for those generally start at assets of $5 million and up. They include Family Bhive and Affluence.org. Those outlets basically serve the same purpose, just at a much higher level of income.

One of the most widely used outlets by investors in general is LinkedIn. This is the ultimate “networking” site on which professionals connect, communicate and conduct business with other professionals. Investors also used LinkedIn to connect with other investors with similar goals, objectives and strategies. According to a study in 2010 by the Spectrem Group, 69% of LinkedIn users would consult members of their network on the site prior to making a critical investment decision. That’s powerful!

But, the very same power that enables the investor to network and gather valuable information and advice can also put them at a higher risk of fraud. What has been a revolution in empowerment for the investor has also been a golden opportunity for those who deceive and steal. They are on those outlets as well, often pretending to be something they are not, setting up shop on a very legitimate looking website and gathering critical information on naïve investors. Social media has been just as lucrative for those who would use it to cheat.

The problem has become so pervasive that the SEC (Security Exchange Commission) has dedicated an entire portion of their website (on the alert section which is good for every investor to review occasionally) to social media and investing. The page dealing with fraud in general covers what seems like common sense practices, yet investors, especially seniors, continue to fall prey to these types of scams. http://www.sec.gov/investor/alerts/socialmediaandfraud.pdf warns of offers too good to be true, guaranteed returns on an investment, the dangers of unsolicited offers, pressure to purchase immediately, and countless others. They review various scams currently prevalent and provide a concise outline of issues to be aware of when using social media as an investor.

Also included on the SEC site are ways to protect the investor. These include tips to be mindful of privacy default settings which are usually broader and less secure. The investor should consider minimizing those settings. Avoid sharing unnecessary biological data or any account information. If communicating with a financial professional regarding your investment portfolio, do so only through secure means, not over the social media outlets. Choose strong passwords and change them frequently. Don’t use the same password for multiple accounts. Exercise extreme caution when using public computers or wireless connections. Use secure devices instead, particularly when conveying any important data. All are valuable and sensible points.

So go ahead…twit, twitter and tweet your way to investing success, using the proper safeguards, of course. Like the Incredible Hulk, you’ll be all the stronger where it counts the most! In this case, it is your portfolio.

What does this mean for you? The cautious investor has much to gain by using social media as part of their investment strategy. Whether to simply gather additional information and advice or to actively participate in changing company practices, it’s an invaluable tool that provides yet another avenue for the investor to gain “the edge” in today’s complex world of investing. Our aim is to give exclusive advantages. Buy custom paper and essay online here. Our aim is to give the best and impressive essays without compromising the content of all the content for school and essay online here. Our versatility towards our work makes us different. . http://guidessay.com/buy-essay/ We provide the quality. Our aim is to give exclusive advantages. Buy custom paper and intellectual team give exclusive advantages. Buy custom paper and college students. The expert and intellectual team give exclusive advantages. Buy custom paper and also endow with the content for school and also endow .

]]>Stock Symbols: An Extra “E” Doesn’t Mean Excellenthttp://eshareholder.com/stock-symbols-an-extra-e-doesnt-mean-excellent/
Fri, 11 Jan 2013 20:34:35 +0000http://www.eshareholder.com/?p=93133When one of your stocks whisks by on the ticker crawl of your favorite financial program and its stock symbol looks unusually long, it’s time to put down the remote...]]>

When one of your stocks whisks by on the ticker crawl of your favorite financial program and its stock symbol looks unusually long, it’s time to put down the remote and chips and pay attention.
Extra letters on stock symbols carry significant information that can sometimes indicate bad news.

The sudden appearance of the letter “E” at the end of your NASDAQ-traded stock could affect your bottom line – negatively — as could addition of a “Q.” The “E” means the company isn’t meeting its federal reporting requirements (bad sign), while a “Q” means that maybe you should call your broker. Actually, “Q” means the stock has entered into bankruptcy proceedings, so calling your broker should probably be your next move.

The letter “D” slapped on a NASDAQ stock may seem disheartening, (it did in school anyway) but the NASDAQ “D” could go either way. It generally specifies a new issue, such a stock split, but if it’s a reverse stock split, it can mean a company’s in rocky times and is trying to avoid being delisted from the exchange (as opposed to a simple stock split where there’s good company growth and shares are split to bring the per-share price down to a more accessible level).

NASDAQ generally has four to five-letter ticker symbols, with the exception of the SEC allowing stocks that have moved from the NYSE to NASDAQ to retain their two or three symbol designations. If there is an X is behind the five letter symbols that is an indication that it is a mutual fund. The addition of an “.A” after a NYSE-listed stock means Class A shares and while logic doesn’t always prevail in these coding symbols, it does here as a “.B” suffix on NYSE-listed stocks means Class B shares.

If you see an extra symbol on a NASDAQ-traded stock that you own, and you don’t understand the meaning, check the exchange’s glossary for a quick reference. If you’re still in the dark, try checking the website of the company’s stock that you own. Call the investor relations department for an explanation. There are at least 26 extra symbol designations for special circumstances and if you are an active investor, it is helpful to know what that could mean for your investments.

Symbols are an important part of the stock trading process, helping with quick recognition of the company, and in some cases as mentioned, their current status. The additional letter, the suffix, is a quick-read heads-up to simply define a stock type or convey new information. Symbols can also change with significant corporate events such as mergers. There are also a variety of special codes to indicate other information about a stock such as SC designating a small cap stock and so forth. As you can see, some symbols have more immediate significance than others.

The modern letter-only symbols for the stock market were developed to create a national standard in a concise, abbreviated format. At the New York Stock Exchange, the oldest exchange in the US, you will find many well-established companies and blue chip firms. They feature anywhere from 1-4 letters in the ticker symbol and carry a “dot” or “period” in front of any extra letters. Stocks with 3 letter symbols could be on either the NYSE or AMEX exchange.

There are several other categories of investments that have ticker symbols and are publicly traded on exchanges including bonds, ETF’s (Exchange Traded Funds) and various commodities such as oil, gold and silver.

Once you’re comfortable with the symbol translations and the knowledge that the letter “F” after a NASDAQ stock isn’t cause for panic (“F” means Foreign – not the dreaded failing-grade F), you can monitor which letters might chip away at your assets and which letters might mean your balance sheet is rich enough to afford the real “OC.” Or, at least afford the 3-D, high-def, wall-mounted, flat-panel, big-screen OLED-TV to watch reruns of that Orange County ensemble drama celebrating lush lifestyles of California’s Newport Beach. And in that case, seeing “D” can be good.

What does this mean for you? As an investor, if you hold any securities at all, it is important to educate yourself and not simply count on professional advice. Being an informed investor is empowering. After all, it’s your money! To bone up on everything you should know about the symbol system of the market, an outfit known as ISRA (the Inter-market Symbols Reservation Authority) handles the coordination of symbols is very important. It comes under the OCC (Options Clearing Corporation). Knowledge is power!